The land in the area was originally inhabited by the IroquoianPetun nation, which built a string of villages in the vicinity of the nearby Niagara Escarpment. They were driven from the region by the Iroquois in 1650. European settlers and freed Black slaves arrived in the area in the 1840s, bringing with them their religion and culture.

The area originally had several other names associated with it, including Hurontario (because it lies at the end of Hurontario Street which runs from Lake Huron — of which Georgian Bay is a part — south to Lake Ontario), Nottawa, and Hens-and-Chickens Harbour, because of one large and four small islands in the bay.

In 1855, the Ontario, Simcoe & Huron (later called The Northern) railway came into Collingwood, and the harbour became the shipment point for goods destined for the upper Great Lakes ports of Chicago and Port Arthur-Ft. William (now Thunder Bay). Shipping produced a need for ship repairs, so it was not long before an organized ship building business was created. On May 24, 1883, the Collingwood Shipyards, formerly known as Collingwood Dry Dock Shipbuilding and Foundry Company Limited, opened with a special ceremony. On September 12, 1901, the Huronic was launched in Collingwood, the first steel-hulled ship launched in Canada. The shipyards produced Lakers and during World War II contributed to the production of Corvettes for the Royal Canadian Navy. Shipbuilding was one of the principal industries in the town, employing as much as 10% of the total labour force. Overseas competition and over capacity in shipbuilding in Canada led to the demise of shipbuilding in Collingwood in September 1986.

The creation of government incentive programs and a fully serviced industrial park made it possible for Collingwood to attract eleven new manufacturing firms to the town by 1971. Eight additional manufacturing companies had located in the town by 1983, making Collingwood the largest industrial employer in the region.

Today, Collingwood's industrial base, which includes Collingwood Ethanol L.P., Pilkington Glass of Canada, Goodall Rubber Company - Canada ULC, and VOAC Inc, and which are among the community’s largest employers, has begun to erode. Several industries in the area have closed in recent years, including Nacan Products (2004), Backyard Products (2004), Kaufman of Collingwood (2006), Goodyear Tires (2007), Alcoa Wheel products (2008) and the internationally-famous Blue Mountain Pottery (2004). Collingwood is also home to the distillery where Canadian Mist Whisky is produced.

In June 2007, Collingwood Ethanol (Now Amaizeingly Green)[2] began production in the former Nacan facility. The company expected to produce 50 million litres of ethanol annually to satisfy regulatory requirements on ethanol content in gasoline mandated by the provincial and federal governments. Collingwood Ethanol[2] also produces byproducts of the ethanol manufacturing process, including an organic corn gluten fertilizer. Petitions have been submitted to the town by residents of a new housing development located across the road in an effort to force Collingwood Ethanol to reduce the amount of odour and noise that they are causing during the times when they are in full production. Before Collingwood Ethanol started production, however, Nacan (a starch plant that once occupied the now ethanol plant) also created a strong odour and noise. This made many locals wonder why a housing development would be built across the road from an industrial part of town. In December 2012, Amaizeingly Green, filed for receivership of the plant. The plant had not been operating for several months due to the higher cost of corn.

Local media include the Collingwood Enterprise-Bulletin and Collingwood-Wasaga Connection community newspapers, and radio station CKCB-FM. The Barrie-based regional television station CKVR-TV maintains a bureau in Collingwood, and the Owen Sound-based Bayshore Broadcasting radio group also has an office in Collingwood. Collingwood is also known for its annual week-end Elvis Presley festival, which attracts Elvis impersonators from the world over in late July of each year.

Collingwood is a destination for winter and summer recreational activities such as swimming, hiking, biking, snowshoeing, cross-country skiing, and downhill skiing. There is a network of trails that allow this, including the Georgian Trail which connects to the Bruce Trail.[5]